Ocean Manufacturing, Inc.: The New Client Acceptance Decision

Case 1.1

Ocean Manufacturing, Inc.: The New Client Acceptance Decision

Ocean Manufacturing, Inc. is recommended as a prospective audit client of Barnes and Fischer, LLP. I believe that Barnes and Fischer should accept the client because of Barnes and Fisher’s opportunities in consulting and information technology (IT) development, Ocean Manufacturing, Inc.’s sound management/business model and past successful audits, and primarily, the growth potential of Ocean Manufacturing, Inc. following its planned IPO.

Ocean Manufacturing has a favorable market position in the Home Appliance Industry. This is a market that Barnes and Fisher has not focused on and would be an “excellent opportunity for Barnes and Fischer to enter a new market.” In addition to entering a new market, Barnes and Fisher would have multiple opportunities for consulting regarding Internal Controls and also in IT Development. Ocean wants advice and guidance for the IPO and troubleshooting its IT system. Barnes and Fisher’s local IT Team is “confident they will be able to diagnose Ocean’s Control Weaknesses and help Ocean overcome current difficulties.” Currently, Ocean Manufacturing Inc. is not Publicly Traded, therefore, its Audit and Internal Controls have been more relaxed but still in accordance with PCAOB. Until the IPO occurs, Barnes and Fischer will be able to offer consulting advice, and according to the PCAOB, will be allowed to engineer the IT Control system after the IPO.

The previous auditor of Ocean Manufacturing, Inc. lacked the technical expertise to understand sophisticated controls software and was not competent in providing required consulting services to move the company towards its goal of national markets and future IPO. “The President explained that the main reason for the switch is to build a relationship with a more nationally established CPA Firm because the Company plans to make an Initial Public Offering, (IPO), of it’s common stock within the next few years.” The previous auditor was perceived to be technically lacking because they did not understand Ocean’s Business and Industry Environment. Ocean’s Management was candid in admitting to have had some minor accounting problems and allowed those at Barnes and Fischer to contact the previous auditor in the spirit of full disclosure.

Ocean Manufacturing, Inc. is planning to go public and expand nationally;